According to Leo Rosten, In
the eyes of many European
Jews, a cross was the sign of
Christian persecution from which they sought the refuge in the
New
World. According to Rosten, Jewish
American merchants continued to sign with an 'O' instead of an
'X' for several decades, spreading the nickname kike wherever they
went as a result. At that time kike was more of an affectionate
term, used by Jews to describe other Jews, and only developed into
an ethnic slur later on.

In his book How the Irish Invented Slang: the
Secret Language of the Crossroads, Daniel
Cassidy suggests an alternative etymology. Cassidy notes that
the Irish
Language word Ciabhóg (pronounced k'i'og) was the general term
used by the Irish and Irish-Americans
to denote the payot of
Orthodox
Jews. The Irish word Ciabhóg means side-curl, which is what
payot are.

Another etymology is that the term comes from the
Greek word for circle, kyklos, and referenced the practice of
circumcision.